stay within the appraised value

You need to keep the loan request amount within the appraised value of the property and the surrounding neighborhood.

Lenders will not
approve you for a $300,000 home purchase mortgage (or refi financing) if comparable homes within the area are valued at $120,000 or less.

Regardless of what you are willing to pay for the
home, lenders would be taking a sizable risk if you
defaulted on the loan.

Most lenders qualify
loan amounts at 80% LTV,

which means that they will underwrite a loan that
is 80% of the appraised or purchase value of the home
(whichever is lesser in most cases).

This requires the home buyer to raise the other 20%
 your down payment. The 80% LTV rule protects the bank in
the event of market declines.

The 80/20
rule also forces the home buyer to have
some vested interest in their home
purchase. With a 20% equity position, home buyers
are more likely to keep the home value
up by making repairs and improvements.

90/10 and 95/5 Loans Available

There are some mortgage
products that allow lenders to lower the
80/20 rule  meaning that
the lender will approve loan amounts at
85%, 90%LTV or more.

Banks view these loans as more risky and will charge higher rates and/or points to underwrite the loan. These loans will also require Private Mortgage Insurace (PMI), which can add to the total cost of your mortgage loan payment.

* Calculations
are based upon the assumptions
you entered. Please note
that rounding errors can
make a small difference
in calculations. Your
actual mortgage lending
rate may vary depending
on your credit quality
and lender. The circumstances
surrounding your credit
and loan qualifications
may result in different
calculations.